OPEC talk sends oil prices sharply higher

OPEC talk sends oil prices sharply higher

Futures advanced 1.2% in NY.

The problem however is that continued production from those producers can actually offset the production cuts from other member nations.

The US oil and gasoline stocks also increased amidst declining refineries output and gasoline demand.

OPEC in tandem with other producers, including Russian Federation, agreed previous year to cut output nearly 1.8 bpd during the first half of 2017. The exporters group implemented about 90% of the pledged cuts last month and Goldman Sachs Group Inc. predicts the market will shift into deficit in the first half of this year.

Despite signs that OPEC's agreement is holding, inventory levels are still very high in many parts of the world.

"This has to be taken within the context of a stable market that continues to record robust demand growth", he said. But as the above data shows the road to higher prices may be longer than expected and during this time hedge funds will have to maintain their bullish belief in order to avoid disappointment which could trigger some aggressive long liquidation.

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Benchmark Brent futures LCOc1 gained 50 cents to touch $56.58 a barrel while USA light crude CLc1 also grew by 50 cents to trade at $53.90 per barrel, reported Reuters.

The US market was closed on Monday for the Presidents Day holiday.

Oil prices rose after the comments, trading above $57 a barrel in London. Total volume traded was about 38 percent below the 100-day average. The global benchmark crude traded at a premium of $2.33 to April WTI. In September, OPEC agreed in principle to cut oil production in an effort to drive prices back up. They gambled that by flooding the oil market, oil prices would fall and American shale oil producers would be forced out of business.

"Until then, lack of bearish news seems to be enough to push prices higher", Fritsch said.

The Organization of the Petroleum Exporting Countries' (OPEC) output cuts have targeted heavy crude, with linchpin producer Saudi Arabia and Venezuela reducing their exports of heavy crude. The exporters group implemented about 90% of the pledged cuts last month and Goldman Sachs Group Inc. predicts the market will shift into deficit in the first half, although USA crude stockpiles have increased to the highest level in more than three decades.

The 11 non-OPEC countries are much further from achieving their required cuts, although Barkindo declined to specify how compliant they are. This follows the arrival in January of 600,000 barrels of U.S. Gulf Blend, a heavy crude made up of a blend of various U.S. and Canadian grades loaded onto ships on the U.S. Gulf Coast, according to the sources and shipping data.